ARC Resources Closes Strategic Montney Combination with Seven Generations

CALGARY, AB, April 6, 2021 /CNW/ - (TSX: ARX) ARC Resources Ltd. ("ARC" or the "Company") is pleased to announce that it has closed its strategic Montney combination with Seven Generations Energy Ltd. ("Seven Generations") to create the premier Montney producer and leader in responsible energy development (the "Business Combination"). ARC is now Canada's largest condensate producer, third-largest natural gas producer, and sixth-largest upstream energy company.

As the largest pure-play Montney producer, ARC owns over 1.1 million net acres of Montney land and has a deep inventory of high-return, de-risked core development opportunities with significant commodity and geographic diversity. ARC produces approximately 340,000 barrels of oil equivalent ("boe") per day, comprising approximately 138,000 barrels per day of liquids and approximately 1.2 billion cubic feet ("Bcf") per day of natural gas. The Company's low cost structure, excellent environmental, social, and governance ("ESG") performance, and superior ability to optimize revenue streams are supported by an extensive network of owned-and-operated infrastructure, with natural gas processing and sales capacity totaling approximately 1.5 Bcf per day. Exercising capital discipline, operating safely and efficiently, maintaining a top-decile balance sheet, and executing an active commodity price risk management program continue to be hallmarks of the organization.

With its compelling ability to generate free funds flow, low debt levels, leading ESG performance, and a sustainable dividend, ARC is a differentiated investment opportunity with significant optionality for future capital allocation, positioned to create significant shareholder value in 2021 and beyond. Immediately following the close of the Business Combination, ARC will be focused on successfully integrating the two companies to become a more efficient business. The Company will be focused on delivering on expected cost savings and synergies of approximately $160 million annually, which includes financing costs that are approximately $50 million lower than they would have been had the Seven Generations senior notes remained outstanding. Free funds flow will initially be directed at strengthening the Company's financial position. Incremental returns to shareholders and investment in profitable growth at ARC's highly prospective Attachie asset are expected to be considered when net debt to annualized funds from operations reaches the low end of the Company's target range of 1.0 to 1.5 times, which, at current forward commodity prices, is expected to occur by year-end 2021. ARC expects to provide formal 2021 guidance for the Company, on a post-Business Combination basis, in early May 2021.

The Business Combination was structured through a plan of arrangement under the Canada Business Corporations Act, where Seven Generations shareholders received 1.108 common shares of ARC for each class "A" common share of Seven Generations (a "7G Share") held. The 7G Shares are expected to be delisted from the Toronto Stock Exchange on or before April 9, 2021.

Capital Structure

ARC is committed to protecting its strong financial position by maintaining significant financial flexibility. To ensure ample liquidity, ARC has syndicated a $2.0 billion unsecured extendible revolving credit facility with a maturity date of 2024 (the "Credit Facility"). As of April 6, 2021, the Credit Facility has approximately $1.2 billion of available liquidity.

On March 10, 2021, ARC completed the issuance of two tranches of private unsecured notes of $1.0 billion aggregate principal amount with a weighted average interest rate of 2.965% and average term of 7.75 years (the "Notes"). The Notes were assigned a provisional rating of BBB with a stable trend by DBRS Morningstar, assuming the successful completion of the Business Combination. On April 6, 2021, ARC used the proceeds from the Notes, combined with draws on the Credit Facility, to repay and/or defease all of Seven Generations' outstanding senior notes, including US$114 million aggregate principal amount of Seven Generations' outstanding 6.875% senior notes due 2023, US$700 million aggregate principal amount of Seven Generations' outstanding 5.375% senior notes due 2025, and US$378 million aggregate principal amount of Seven Generations' outstanding 6.750% senior notes due 2023.

As of April 6, 2021, ARC has approximately $2.4 billion of net debt outstanding, excluding capital leases. At current forward commodity prices and with a strong deleveraging plan in place, ARC expects its net debt balance will be reduced to the low end of the Company's target range of 1.0 to 1.5 times annualized funds from operations by year-end 2021.

With the Company's refinancing complete and a lower overall cost of capital, ARC expects to immediately realize significant interest savings. Following the Business Combination, financing costs are expected to be approximately $50 million lower than they would have been had the Seven Generations senior notes remained outstanding. ARC is currently one of only three natural gas companies in North America with the ability to issue investment-grade debt and will continue to prioritize conservative debt levels.

ARC has 724 million common shares outstanding as of April 6, 2021.

Governance and Leadership

ARC is committed to maintaining the highest standards of corporate governance and risk management. The Company will benefit from the experience of Hal Kvisle as independent Chair, Marty Proctor as Vice-Chair, and Farhad Ahrabi, David Collyer, Susan Jones, William McAdam, Michael McAllister, Kathleen O'Neill, M. Jacqueline Sheppard, Leontine van Leeuwen-Atkins, and Terry Anderson as directors. ARC will continue to promote diversity and inclusion within the organization by maintaining a minimum of 30 per cent female representation at the Board level and participating in initiatives like the 30% Club and the Bloomberg Gender-Equality Index.

ARC's leadership team brings together the strengths and talents of both ARC and Seven Generations. The members of the senior leadership team are:

• Terry Anderson – President and Chief Executive Officer
• Kris Bibby – Senior Vice President and Chief Financial Officer
• David Holt – Senior Vice President and Chief Operating Officer
• Lara Conrad – Senior Vice President, Development
• Armin Jahangiri – Senior Vice President, Capital Projects

ARC's executive office will remain headquartered in Calgary, Alberta, with field offices located in Grande Prairie, Alberta, Dawson Creek, British Columbia, and Drayton Valley, Alberta.

Forward-looking Information and Statements

This news release contains certain forward-looking statements and forward-looking information (collectively referred to as "forward-looking information") within the meaning of applicable securities legislation about current expectations about the future, based on certain assumptions made by ARC. Although ARC believes that the expectations represented by such forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. Forward-looking information in this news release is identified by words such as "expect", "will", "continue", "target", or similar expressions and includes suggestions of future outcomes, including statements about the characteristics of ARC following the completion of the Business Combination; the timing of issuing formal 2021 guidance for ARC on a post-Business Combination basis; the ability of ARC to generate free funds flow and the anticipated uses thereof; the timing of achieving ARC's target range of net debt to annualized funds from operations; anticipated cost savings and synergies; the anticipated benefits stemming from the leadership and experience of ARC's directors; ARC's intentions to maintain a threshold level of female representation at the Board level; and the locations of ARC's headquarters and field offices.

Readers are cautioned not to place undue reliance on forward-looking information as ARC's actual results may differ materially from those expressed or implied. ARC undertakes no obligation to update or revise any forward-looking information except as required by law. Developing forward-looking information involves reliance on a number of assumptions and consideration of certain risks and uncertainties, some of which are specific to ARC and others that apply to the industry generally. Material factors or assumptions on which the forward-looking information in this news release include: ARC's ability to successfully integrate the business of Seven Generations; access to sufficient capital to pursue any development plans; ARC's ability to issue securities; the impacts the Business Combination may have on the current credit ratings of ARC; forecast commodity prices and other pricing assumptions; forecast production volumes based on business and market conditions; the accuracy of outlooks and projections contained herein; projected capital investment levels, the flexibility of capital spending plans, and associated sources of funding; achievement of further cost reductions and sustainability thereof; applicable royalty regimes, including expected royalty rates; future improvements in availability of product transportation capacity; opportunity for ARC to pay dividends and the approval and declaration of such dividends by the board of directors of ARC; cash flows, cash balances on hand, and access to the Credit Facility being sufficient to fund capital investments; foreign exchange rates; near-term pricing and continued volatility of the market; the ability of ARC's existing pipeline commitments and financial hedge transactions to partially mitigate a portion of ARC's risks against wider price differentials; estimates of quantities of oil, natural gas, and liquids from properties and other sources not currently classified as proved; accounting estimates and judgments; future use and development of technology and associated expected future results; ARC's ability to obtain necessary regulatory approvals; the successful and timely implementation of capital projects or stages thereof; the ability to generate sufficient cash flow to meet current and future obligations; estimated abandonment and reclamation costs, including associated levies and regulations applicable thereto; ARC's ability to obtain and retain qualified staff and equipment in a timely and cost-efficient manner; ARC's ability to carry out transactions on the desired terms and within the expected timelines; forecast inflation and other assumptions inherent in the guidance of ARC; the retention of key properties; the continuance of existing tax, royalty, and regulatory regimes; the accuracy of the estimates of each of ARC's and Seven Generations' reserve volumes; ARC's ability to access and implement all technology necessary to efficiently and effectively operate its assets; the ongoing impact of novel coronavirus COVID-19 ("COVID-19") on commodity prices and the global economy; and other risks and uncertainties described from time to time in the filings made by ARC with securities regulatory authorities.

The forward-looking information in this news release also includes financial outlooks and other related forward-looking information (including production and financial-related metrics) relating to ARC following the completion of the Business Combination, including: the expectations of ARC regarding the impact of the Business Combination on free funds flow, net debt, production, and net debt to annualized funds from operations. Any financial outlook and forward-looking information contained in this news release regarding prospective financial performance or financial position is based on reasonable assumptions about future events, including economic conditions and proposed courses of action based on the assessment by Management of ARC of the relevant information that is currently available. These projections may also be considered to contain future-oriented financial information or a financial outlook. The actual results will likely vary from the amounts set forth herein and such variations may be material. Readers are cautioned that any such financial outlook and forward-looking information contained herein should not be used for purposes other than those for which it is disclosed herein. Such information was made as of the date of this news release and ARC disclaims any intention or obligation to update or revise any such information, whether as a result of new information, future events, or otherwise, unless required pursuant to applicable law.

The risk factors and uncertainties that could cause actual results to differ materially from the anticipated results or expectations expressed in this news release, include: the ability of ARC to realize the anticipated benefits of, and synergies from, the Business Combination and the timing thereof; failure to achieve and sustain future cost reductions; the impacts of a changing risk profile and possible subjection to a credit rating review, which may result in a downgrade or negative outlook being assigned to ARC; the ability of ARC to pay dividends and the approval and declaration of such dividends by the board of directors of ARC; potential undisclosed liabilities unidentified during the due diligence process; the interpretation of the Business Combination by tax authorities; the success of business integration; the ability to access or implement some or all of the technology necessary to efficiently and effectively operate the assets and achieve expected future results; volatility of and other assumptions regarding commodity prices; the duration of the market downturn; a resurgence in cases of COVID-19, which has occurred in certain locations, and the possibility of which in other locations remains high and creates ongoing uncertainty that could result in restrictions to contain the virus being re-imposed or imposed on a more strict basis, including restrictions on movement and businesses; the extent to which COVID-19 impacts the global economy and harms commodity prices; the extent to which COVID-19 and fluctuations in commodity prices associated with COVID-19 impacts the business, results of operations, and financial condition, all of which will depend on future developments that are highly uncertain and difficult to predict, including, but not limited to the duration and spread of the pandemic, its severity, the actions taken to contain COVID-19 or treat its impact, and how quickly economic activity normalizes; the success of new COVID-19 workplace policies and the ability of people to return to workplaces; continued liquidity being sufficient to sustain operations through a prolonged market downturn; the effectiveness of risk management programs, including the impact of derivative financial instruments, the success of hedging strategies, and the sufficiency of liquidity positions; product supply and demand; accuracy of share price and market capitalization assumptions; market competition, including from alternative energy sources; risks inherent in marketing operations, including credit risks, exposure to counterparties and partners, including ability and willingness of such parties to satisfy contractual obligations in a timely manner; the ability to maintain desirable net debt ratios; the ability to access various sources of debt and equity capital, generally, and on acceptable terms; the ability to finance growth and sustaining capital expenditures; changes in credit ratings; changes to dividend plans; the ability to utilize tax losses in the future; accuracy of reserves, future production, and future net revenue estimates; the potential for variation in the quality of the Montney formation; unanticipated results from exploration and development activities; accuracy of accounting estimates and judgments; the ability to replace and expand oil and gas reserves; potential requirements under applicable accounting standards for impairment or reversal of estimated recoverable amounts of some or all of assets or goodwill from time to time; the ability to maintain relationships with partners and to successfully manage and operate integrated businesses; reliability of assets including in order to meet production targets; potential disruption or unexpected technical difficulties in developing new products and manufacturing processes; the occurrence of unexpected events such as fires, severe weather conditions, explosions, blow-outs, equipment failures, transportation incidents, and other accidents or similar events; marketing margins; cost escalations, including inflationary pressures on operating expenses, including labour, materials, and increased insurance deductibles or premiums; potential failure of products to achieve or maintain acceptance in the market; risks associated with fossil fuel industry reputation and litigation related thereto; risks associated with technology and equipment, including potential cyberattacks; risks associated with climate change and assumptions relating thereto; the ability to secure adequate and cost effective product transportation including sufficient pipeline or alternate transportation, including to address any gaps caused by constraints in the pipeline system or storage capacity; availability of, and the ability to attract and retain, critical talent; possible failure to obtain and retain qualified staff and equipment in a timely and cost-efficient manner; changes in labour relationships; changes in the regulatory framework in any of the locations in which ARC operates, including changes to the regulatory approval process and land-use designations, royalty, tax, environmental, greenhouse gas, carbon, climate change, and other laws or regulations, or changes to the interpretation of such laws and regulations, as adopted or proposed, the impact thereof and the costs associated with compliance; the expected impact and timing of various accounting pronouncements, rule changes, and standards; changes in general economic, market, and business conditions; the impact of production agreements among Organization of the Petroleum Exporting Countries ("OPEC") and non-OPEC members; political and economic conditions; the occurrence of unexpected events such as pandemics, war, terrorist threats, and the instability resulting therefrom; and risks associated with existing and potential future lawsuits, shareholder proposals, and regulatory actions.

Additional information about assumptions, risk factors, and uncertainties on which the forward-looking information is based and that could cause ARC's actual results to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements are described in the joint management information circular of ARC and Seven Generations dated March 1, 2021 and the documents incorporated by reference therein, which are available on ARC's website at www.arcresources.com, as applicable, and on ARC's SEDAR profile at www.sedar.com and are incorporated by reference herein.

Barrels of Oil Equivalent

Natural gas volumes have been converted to boe on the basis of six thousand cubic feet ("Mcf") to one barrel ("bbl"). Boe may be misleading, particularly if used in isolation. A conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil compared with natural gas is significantly different from the energy equivalency conversion ratio of 6:1, utilizing a conversion on a 6:1 basis is not an accurate reflection of value.

Advisory – Credit Ratings

Credit ratings are intended to provide investors with an independent measure of credit quality of an issue of securities. Credit ratings are not recommendations to purchase, hold, or sell securities and do not address the market price or suitability of a specific security for a particular investor. There is no assurance that any rating will remain in effect for any given period of time or that any rating will not be revised or withdrawn entirely by the rating agency in the future if, in its judgment, circumstances so warrant.

About ARC

ARC is the largest pure-play Montney producer and one of Canada's largest dividend-paying energy companies, featuring low-cost operations and leading ESG characteristics. ARC's investment-grade credit profile is supported by commodity and geographic diversity and robust risk management practices around all aspects of the business. ARC's common shares trade on the TSX under the symbol ARX.

For further information about ARC Resources Ltd., please visit ARC's website at www.arcresources.com or contact Investor Relations:

E-mail: [email protected]
Telephone: [phone]
Fax: [phone]
Toll Free: 1-888-272-4900
ARC Resources Ltd.
Suite 1200, 308 - 4^th Avenue SW
Calgary, AB  T2P 0H7

SOURCE ARC Resources Ltd.

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